An opt-out may encourage healthy individuals to drop coverage, leaving the employer with a pool of employees who will incur higher-dollar claims. (Photo: Shutterstock)
As a result of the strong economy and the Tax Cuts and Jobs Act of 2017, many employers are considering ways to enhance their benefits packages. Some employers have already increased employer contributions towards their health plans and others have increased their 401(k) matching contributions. Another potential option for employers is to add an opt-out payment for those who waive health coverage.
By opt-out payments, I am referring to payments that:
- Are available only if the employee declines or waives coverage under an employer-sponsored health plan; and
- Cannot be used to pay for coverage under the employer-sponsored health plan.
An example of such a payment is where ABC Corp offers their full-time employees medical coverage at a cost of $100 per month for individual coverage. They also offer a $50 per month opt-out payment to full-time employees who decline or waive coverage under the ABC Corp plan. Under this arrangement, employees can pay $100 per month to take the coverage or receive $50 if they decline or waive.
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